Railway freight in an f.o.r. destination sale is excluded from sale price when delivery passes to the carrier at loading

Railway freight paid by the purchaser under an f.o.r. destination arrangement did not form part of the sale price where the contract showed delivery was complete on handing goods to the carrier at the loading station and the freight had been deducted from the bill price. Freight is included in sale price only when the contract keeps delivery and risk with the seller up to the destination station. On those findings, the freight was not consideration payable to the seller and was not includible under the relevant sales tax definitions.

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Issues: Whether railway freight paid by the purchaser in respect of goods sold under an f.o.r. destination arrangement formed part of the sale price under section 2(o) of the M.P. General Sales Tax Act, 1958 and section 2(h) of the Central Sales Tax Act, 1956.

Analysis: The sale conditions showed that delivery was complete when the goods were delivered to the carrier at the loading station, and the Tribunal found that the freight had been deducted from the bill price and borne by the purchaser. On those findings, the contract was not one where freight constituted part of the consideration payable to the seller. The applicable principle is that freight forms part of the sale price only where, under the contract, delivery and risk remain with the seller up to the destination station.

Conclusion: The railway freight did not form part of the sale price and was not includible under section 2(o) of the M.P. General Sales Tax Act, 1958 or section 2(h) of the Central Sales Tax Act, 1956.

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